The Worst of Human Nature

No fun; these two words perfectly describe the ordeal public school teachers endure when they attempt to open up a 403(b) retirement account.

On January 14, 1978 in San Francisco, California, the Sex Pistols performed their last concert at the Winterland Theater. Before departing, the group’s leader, Johnny Rotten sneered at the crowd, “Ever get the feeling you’ve been cheated? Good night!”

I could not help but think of this line after speaking with the husband of a public school teacher. Ed Lafave, a software engineer in Florida, described in detail the awful experience he had trying to enroll his wife in her district’s 403(b) plan.

Incompetent, hostile, and predatory would sum things up pretty well. Teachers all over the country are victimized every day by a system designed to feed financial predators their own form of live bait.

Ed reached out to me hoping I would help publicize his horrific experience. Putting a human face on a problem can sometimes work wonders.

Here are some excerpts from our conversation:

Why did you get involved with your wife’s 403(b)?

I went through quite a learning experience. I was exploited by a couple of large financial firms before I made the mistake of investing in high-cost active funds all on my own. It took me several years to learn about the benefits of low-cost, total market index funds. So by the time Heather had money to invest, I already had the experience and knowledge to deal with these issues. Also, Heather was just promoted to Assistant Principal so her energy and focus was being consumed by that transition.

…I had no idea what kind of mess I was stepping into.

What happened when you started to make some phone call regarding her choices?

It is important to first note how awful these vendors’ web sites are. I believe they’re intentionally designed to withhold information, so you’re forced to call in. This is a technique that prevents investors from gaining knowledge and pushes investors into verbal discussions (preferably face-to-face) with sales reps where investors can be more easily manipulated.

Generally speaking the sales reps fell into a few different categories:

Some reps were literally reading marketing material to me and knew nothing about investing, much less the plans they were selling. In retrospect, I should have asked to speak to a “manager” or simply hung up; but I wound up wasting a lot of time because those options seemed rude.

Some reps were slightly more informed/polished, but made obviously false statements.

Some reps were more cunning and tried to prey on financial fears. They would make these vague statements about how an expert is truly necessary and they would imply they had some kind of magic to save me from bear markets.

Some reps picked up on my focus on expenses and they used a polished argument that borrowed the authority of the state and our superintendent to argue that fees just shy of 2% were “low.”

Every rep had a way of speaking quickly that made it virtually impossible to keep track of what they were saying. Every time I had to repeatedly tell reps to slow down and I consistently had to repeat things back to them to make sure I got it right (I often didn’t).

How would you describe your treatment by the business office?

I’d describe it as hostile, adversarial, and generally awful.

They attempted to steer me towards more expensive plans…I wish I could remember which ones, but that detail is gone.

They seemed to be trained to avoid taking on any kind of responsibility/accountability. I’d repeat back the things they just told me and they’d say things like: “Sir, those are your words not mine.”

They never volunteered to research any of this, they put the burden squarely on my shoulders.

What was the most frustrating part of this experience?

The actual process of dealing with the vendors was easily the most frustrating. Dealing with a financial predator is obviously upsetting and stressful but it is exhausting to deal with a poorly trained and ill-informed layer of bureaucracy that obscures the financial predator. If I go head-to-head with a financial predator then we’re going to immediately recognize each other for who we both are and quickly move on with our lives. However, this extra layer of low-information bureaucracy wasted an incredible amount of time before I could determine which financial institutions were exploitative.

What advice would you have for teachers when they deal with this process?

My number one piece of advice would be William Bernstein’s quote, “act as if every broker, insurance salesman, mutual fund salesman and financial advisor you encounter is a hardened criminal.”

What was your biggest motivation for setting up your website?

The 403(b)/457(b) world represents, to a degree, the worst of human nature…the targeted, intentional exploitation of the vulnerable. However, it was a perfect storm of motivations for me:

As I mentioned earlier, I went down a long road of financial exploitation that probably wouldn’t have happened if I wasn’t ashamed of it or if I felt like it wasn’t taboo to discuss money in “polite company.” Ever since, I’ve actively fought against both of those forces, telling all of my friends, family, and coworkers about what happened to me and how they can avoid it. So I was already primed to go down this road.

There was a violation of fundamental fairness. I’ve always thought educators were one of society’s most important professions. So it has always bothered me that other professions (like mine, where I contribute nothing to society) are paid so much more than educators. Then when I learned there was a sophisticated scheme to raid these folks’ retirement accounts…it was just too much. Cartoon-ish immorality, kicking people when they’re down, salt in the wound, etc.

A couple years ago I learned who MLK really was when I took the time to read his manuscripts, letters, articles, books, speeches, and so forth. Not that what I’m doing can be mentioned in the same sentence as Dr. King, but he deeply inspired me to look beyond myself and help people when I have the skill, knowledge, and ability to do so. Then the corruption and immorality of the 403(b)/457(b) world was placed on my doorstep. I felt responsible to do something.

This is why we do what we do. We will not stop until we help break the back of this sophisticated scheme to plunder the retirement accounts of public school teachers. We just added another ally in our fight. We need plenty more people like him to win this war.

Ed has a blog which is designed to help public school teachers in Florida. Dr. King would be proud.